Howe v NSW Coastal Homes Pty Ltd

The Reasons for Decision

1. The Tribunal delivered written reasons dated 20 November 2015. The Tribunal summarised the history of the matter and identified a Scott Schedule submitted 25 June 2014 which contained three items and it was identified by the Tribunal that an allowance was made for establishment/insurances of $6,931.
2. A written contract between the parties dated 11 May 2009 provided for the builder to build a new house for the homeowners in the sum of $317,787. The builder was licensed to undertake the work. The Tribunal was satisfied there was jurisdiction to hear and determine the application.
3. It was identified that the installation of the windows was not in accordance with the manufacturer's requirements and that the Council will not pass the work and provide appropriate certificates. The method of rectification was in dispute. There was no dispute that there was mould on the cladding.
4. The builder provided a report from Mr Guy which identified that the mould was able to be repaired and repainted. The evidence from the builder was that the painting of the pergola was simply normal wear and tear and maintenance issues. The issue of the window installation was not addressed.
5. The homeowners relied upon the evidence of Mr Beard. The Tribunal accepted the evidence Mr Beard in relation to the method of rectification of the mould. The cost of that rectification work was $18,500 which was accepted by the Tribunal as reasonable and in the absence of evidence of alternative quotes from the builder.
6. The Tribunal accepted the evidence of Mr Beard that the painting of the pergola was defective because the primer caused a problem. The Tribunal accepted that some deterioration is to be expected and repainting of the Pergola is part of an ongoing maintenance program. The Tribunal ultimately allowed one third of the quoted cost of repainting the Pergola as reasonable given the passage of time.
7. The decision identified and discussed the statutory warranties. There is no error alleged in relation to those matters.
8. The Scott Schedule referred to an amount $6,931 for "establishment/insurances" about which the Tribunal concluded that the basis of the claim was not apparent and did not arise from any breach of warranty by the respondent and consequently was not allowed. There is no discussion or allowance made for the payment of GST. Clear reference is made to the payment of GST as part of the total amount which should be ordered, in the event of an order for the payment of money, in the Scott Schedule. The Scott Schedule refers to the sum of $5133.10 as contended by the homeowners and $32.40 as contended by the builder.

Relevant legal principles

1. This is an internal appeal: see sections 4 and 32 of the Civil and Administrative Tribunal Act 2013 (NSW) ("the Act"). Section 81 of the Act provides: 81 Determination of internal appeals (1) In determining an internal appeal, the Appeal Panel may make such orders as it considers appropriate in light of its decision on the appeal, including (but not limited to) orders that provide for any one or more of the following: (a) the appeal to be allowed or dismissed, (b) the decision under appeal to be confirmed, affirmed or varied, (c) the decision under appeal to be quashed or set aside, (d) the decision under appeal to be quashed or set aside and for another decision to be substituted for it, (e) the whole or any part of the case to be reconsidered by the Tribunal, either with or without further evidence, in accordance with the directions of the Appeal Panel. (2) The Appeal Panel may exercise all the functions that are conferred or imposed by this Act or other legislation on the Tribunal at first instance when varying, or making a decision in substitution for, the decision under appeal.
2. An internal appeal from a final decision in the Consumer and Commercial Division is heard by the Appeal Panel. The basis upon which appeals from decisions of the Consumer and Commercial Division may arise is referred to in section 80(2)(b) of the Act. That section states that an appeal may be made as of right on any question of law, or with leave of the Appeal Panel on any other grounds.
3. The Appeal Panel therefore has the capacity and power to make a different decision to that of the Tribunal below if the appeal is allowed, or leave to appeal is appropriate.
4. The appellant contends in the Notice of Appeal that there was an error of law in the original decision because the Member did not apply section 48O (1)(c)(i) of the Home Building Act 1989 (NSW) and allow the builder to rectify the defective works. This was not the submission made ultimately at the appeal hearing. Instead, the appellant builder submitted that the error of law was failure to apply section 48MA of the Home Building Act. Neither of these alleged errors are able to be sustained for the following two reasons.
5. Firstly, section 48O of the Home Building Act permits the Tribunal to make a work order to rectify any defective work, but does not require that the Tribunal make such an order. The exercise of that power is a matter of discretion and dependent upon the evidence and findings made by the Tribunal: see for example Jubian v Clark; Clark v Jubian [2016] NSWCATAP 56 at [43]. The power to make such an order against a party, as was made in this matter, relying upon section 48O, was undoubted by the plurality of the Court of Appeal in Italiano v Carbone & Ors [2005] NSWCA 177.
6. Secondly, clause 121(2) of Schedule 4 of the Home Building Act provides that amendments made by the Home Building Amendment Act 2014 (NSW) does not apply to or in respect of proceedings "commenced in a court or tribunal before the commencement of the amendment (whether or not the proceedings were finally determined before that commencement)". The operation of the insertion of section 48MA into the Home Building Act did not commence until 15 January 2015. These proceedings commenced in the Tribunal on 26 November 2013. That section now requires the Tribunal, in determining a building claim commenced after 15 January 2015 to have regard to the "principle that rectification of the defective work by the responsible party is to be a preferred outcome." This was not a principle the Tribunal was required to apply in this matter and even if it did apply the result may have nevertheless been a monetary order, having regard to the discretion conferred by section 48O referred to previously in these reasons.
7. The appellant is thus required to seek leave under section 80 (2)(b) of the Act and clause 12 of Schedule 4 of the Act, because leave to appeal is required where there is no appeal as of right on a question of law. The first two limbs of this provision, which are the only ones relevant in this matter are as follows: "(1) An Appeal Panel may grant leave under section 80(2)(b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence,..."
8. The decision of the Appeal Panel in Collins v Urban [2014] NSWCATAP 17, at [65]-[84], constituted by the President Justice Wright, Deputy President Westgarth and Principal Member Harrowell, comprehensively discussed the processes of an internal appeal such as these appeals.
9. In Collins v Urban the Appeal Panel stated at [77]-[79]: "[77] As to the particular grounds in cl 12(1)(a) and (b), without seeking to be exhaustive in any way, the authorities establish that: (1) If there has been a denial of procedural fairness the decision under appeal can be said to have been "not fair and equitable" - Hutchings v CTTT [2008] NSWSC 717 at [35], Atkinson v Crowley [2011] NSWCA 194 at [12]. (2) The decision under appeal can be said to be "against the weight of evidence" (which is an expression also used to describe a ground upon which a jury verdict can be set aside) where the evidence in its totality preponderates so strongly against the conclusion found by the tribunal at first instance that it can be said that the conclusion was not one that a reasonable tribunal member could reach - Calin v The Greater Union Organisation Pty Ltd [1991] HCA 23; (1991) 173 CLR 33 at 41-42, Mainteck Services Pty Limited v Stein Heurtey SA [2013] NSWSC 266 at [153]. [78] If in either of those circumstances the appellant may have been deprived of a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved then the Appeal Panel may be satisfied that the appellant may have suffered a substantial miscarriage of justice because the decision was not fair and equitable or because the decision was against the weight of the evidence. [79] In order to show that a party has been deprived of a "significant possibility" or a "chance which was fairly open" of achieving a different and more favourable result because of one of the circumstances referred to in cl 12(1)(a), (b) or (c), it will be generally be necessary for the party to explain what its case would have been and show that it was fairly arguable. If the party fails to do this, even if there has been a denial of procedural fairness, the Appeal Panel may conclude that it is not satisfied that any substantial miscarriage of justice may have occurred - see the general discussion in Kyriakou v Long [2013] NSWSC 1890 at [32] ff concerning the corresponding provisions of s 68 of the CTTT Act and especially at [46] and [55]."

The Appeal

1. The Notice of appeal filed by the builder did not seek leave to appeal. The Reply to Appeal filed by the homeowners identified that the builder requires leave to appeal, and opposed leave being granted. The appellant requires leave to appeal. In essence, the appellant contends that the decision in the Tribunal was not fair and equitable, and additionally says that the decision was against the weight of the evidence. If either or both of those contentions are made out then it is likely that leave to appeal would be granted.
2. The original application of the homeowners in the Tribunal, filed 26 November 2013, sought an order for payment of $440 and an order for rectification work to the value of $35,600.
3. The builder contends that the Tribunal Member refused to hear any submissions concerning whether there should be a money order or a rectification order made as a result of the ultimate determination of the issues by the Tribunal. The argument is that the Tribunal failed to engage with the parties' positions concerning the appropriateness of a rectification order or money order.
4. An edited transcript of the recordings made on 12 May 2015 and 17 August 2015 became Exhibit A before the Appeal Panel. On 12 May 2015 the Member stated that brief oral submissions would be able to be made concerning the remedy. In contrast, on 17 August 2015 the Member stated that there will "either [be] a work order or a money order" and when the homeowners sought to address on the issue the Member refused to hear them.
5. The homeowners opposed the builder's application for leave to appeal on the basis that the decision was just and equitable and that the evidence did not support a contention that the builder could comply with a rectification order within a reasonable time period and to a satisfactory standard of completion.

The Cross-Appeal

1. The homeowners did not originally seek leave to appeal but equally did not identify a question of law upon which they could appeal as of right from the decision of the Tribunal.
2. In submissions before the Appeal Panel the homeowners identified that if leave was required under section 80 (2)(b) of the Act and clause 12 of Schedule 4 of the Act, they primarily rely upon the not fair and equitable provision and secondly rely upon the against the weight of evidence provision of clause 12 (1) (a) and (b) of schedule 4 of the Act.
3. The homeowners, although they contended that the decision was fair and equitable in response to the builder's appeal, submitted that the decision was not fair and equitable by the exclusion of Establishment and Insurance costs of $6,931 and through not addressing the issue of GST in the sum of $5,133. It was submitted that it was neither fair nor reasonable to exclude those expenses. Additionally, the homeowners submitted that the Tribunal should have given more weight to the technical findings of the expert report in relation to the Pergola.

Leave to appeal principles

1. In Collins v Urban the Appeal Panel summarised the general principles on the grant of leave to appeal as follows: "[80] If the Appeal Panel is satisfied that the applicant for leave to appeal from a decision of the Consumer and Commercial may have suffered a substantial miscarriage of justice on one of the grounds identified in cl 12(1)(a), (b) or (c), then the Panel "may" grant leave under s 80(2)(b) of the Act. [81] Thus, even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12 of Schedule 4 to the Act, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b). [82] The principles which govern the granting of leave to appeal by the Appeal Panel under s 80(2)(b) should generally be consistent with those which are applied by Courts when considering the question of leave to appeal. These have recently been summarised by the Court of Appeal in BHP Billiton Ltd v Dunning [2013] NSWCA 421. In addition, the Supreme Court has considered the principles which apply when granting leave to appeal to the Court from a decision of the Guardianship Tribunal in a number of cases including SAB v SEM [2013] NSWSC 253. The Guardianship Tribunal has now been absorbed into the Tribunal as the Guardianship Division. As there are alternate rights of appeal from decisions of the Guardianship Division to the Supreme Court or the Appeal Panel (see cll 12 to 14 of Schedule 6 to the Act) both by leave in the case of interlocutory decisions or on grounds other than a question of law, the same principles should apply in deciding whether to grant leave to appeal to the Court or to the Appeal Panel. [83] Further, the Appeal Panel has addressed the relevant principles to be applied when deciding whether to grant leave to extend an appeal to the merits of the decision (under s 113(2) of Administrative Decisions Tribunal Act 1997 (NSW)) in Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10. These principles may be applied by analogy when considering whether to grant leave to appeal under s 80(2)(b) of the Act. [84] The general principles derived from these cases can be summarised as follows: (1) In order to be granted leave to appeal, the applicant must demonstrate something more than that the primary decision maker was arguably wrong in the conclusion arrived at or that there was a bona fide challenge to an issue of fact: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [19] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; (2) Ordinarily it is appropriate to grant leave to appeal only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed, BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [20] and the authorities cited there, SAB v SEM [2013] NSWSC 253 at [8] and [9] and the authorities cited there, Nakad v Commissioner of Police, NSW Police Force [2014] NSWCATAP 10 at [45]; (3) In relation to an application for leave to appeal relating to a question of practice and procedure, the application is to be approached with the restraint applied by an appellate court when reviewing such decisions, especially if the application is made during the course of a hearing: BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [21] and the authorities cited there."

Determination

1. The homeowners submitted the fact that the council will not issue a final Occupation Certificate because the building is non-compliant and requires rectification work prejudices their ability to sell the property in the event that they were required or desired to sell.
2. The homeowners readily acknowledge that originally they sought rectification of the defective work.
3. Given the length of time which has elapsed since the original application by the homeowners, it is submitted on their behalf that they have lost all confidence in the ability of the builder to rectify any works within a reasonable timeframe. The fact that the builder's licences were suspended and that it did not have in place home warranty insurance are additional factors the homeowners identify as mitigating against a rectification order.
4. The builder states to the Appeal Panel that if an order for rectification work were made it would immediately apply for the requisite home warranty insurance to be reinstated. The builder did not know that its' licences had been suspended until Exhibit B was tendered to the Appeal Panel. The builder has assumed that the late payment to the homeowners has not been recorded on the NSW Fair Trading record-keeping system and that is why its' licences have been suspended. The letter dated 7 January 2016 from NSW Fair Trading would appear to indicate that the licenses have been suspended because payment of the amount of $41,700 to the homeowners has not been recorded upon the system, because of failure by the builder to notify NSW Fair Trading of the payment. The builder submits that he is now ready willing and able to perform rectification work.
5. The failure of the Tribunal to hear further submissions in relation to the form of order which was to be made by the Tribunal may constitute a denial of procedural fairness sufficient for the decision be considered not fair and equitable. If this were the only matter raised it is not apparent from matters which subsequently transpired that either party was significantly prejudiced by the failure to hear those submissions. However, it is apparent that the Tribunal was aware on 12 May 2015 that submissions on the remedy were appropriate. It was a legitimate expectation of the parties, given that statement, that the Tribunal would hear further submissions. This did not occur.
6. The failure to provide for GST and the establishment and insurance costs may constitute a conclusion that a reasonable Tribunal member could not reach on the basis of the evidence before the Tribunal. It is apparent that GST is payable and should have been taken into account. Establishment and insurance costs are also payable and should have been included even if the quantum was in dispute and a different sum was ultimately awarded. It is more than arguable that the failure to take these matters into account was unreasonably arrived at and constitutes a factual error requiring intervention. If further submissions were required concerning either of those issues the appropriate time to deal with those matters was during the course of the hearing. Those matters were included in the evidence submitted on behalf of the homeowners and not apparently in dispute except as to quantum if an order was made for payment of money instead of rectification.
7. Considering the matters together, in the circumstances and having regard to the parties' submissions, the Appeal Panel concludes that leave to appeal the decision of the Tribunal should be granted in respect of both the appeal and the cross appeal.
8. The Appeal Panel having determined that leave to appeal should be granted is now to consider what remedy, if any, follows from the reconsideration of the matters which were before the Tribunal.

Reconsideration

1. The submissions by the builder are that a rectification order is more appropriate than the payment of monies to the homeowners. The submissions identify that the rectification work, it is asserted, can be completed within 12 weeks from date of the decision. The submissions of the builder propose that if the work is not completed either party can seek to renew the proceedings on the basis that the order has not been complied with and have it set aside.
2. The homeowners disagree with the submission of the builder and rely upon the history of interactions with the builder and the long procedural history of the proceedings in the Tribunal to base the submission that the timely disposal of the proceedings will not be achieved in the event that the builder is unable to implement its good intentions to complete the rectification works.
3. The "guiding principle" for the Act and the procedural rules, in their application to proceedings in the Tribunal, as referred to in section 36(1) of the Act, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. The provisions of section 36(4) of the Act require that the practice and procedure of the Tribunal should be implemented so as to facilitate the resolution of the issues between the parties in such a way that the cost to the parties and the Tribunal is proportionate to the importance and complexity of the subject-matter of the proceedings.
4. The quantum now in dispute and the amount of time these proceedings have already involved for the parties and for the Tribunal is disproportionate to the complexity of the subject matter of the proceedings. Additionally, there are a number of prerequisite steps the builder must undertake before it can engage in any rectification work. There is no established basis for assuming that the builder could complete the rectification works within the time proposed by the builder. The Appeal Panel therefore finds that an order for rectification works by the builder is more likely to defeat the provisions of section 36 of the Act referred to earlier.
5. There is no dispute that the Tribunal found as a matter of fact that the amount of money to compensate for the performance of rectification work is $41,700. The Appeal Panel does not propose to vary the amount found by the Tribunal to be appropriate. Additionally the parties to the appeal and cross-appeal agree that the amount of $41,700 has now been paid by the builder to the homeowners. In relation to the Pergola the Tribunal accepted that allowance must be made for the fact the repainting must be done as part of ongoing maintenance program and therefore did not allow the whole of the amount claimed by the homeowners. That is, with respect, not an unreasonable conclusion and in our view no injustice has been established.
6. The establishment and insurance costs were specified in the Scott Schedule as $6,931 and in the absence of any evidence to the contrary this amount would appear to be an appropriate allowance. In our view, the decision was unjust to dismiss the claim for "establishment/insurances" on the basis that those items "were not addressed in any way, in submissions or evidence" (para 37 of the decision). In fact those items were included in the Scott Schedyle which had in other respects been accepted. The total of those amounts are therefore $48,631 upon which GST is payable in the sum of $4,863.10. The total amount which is therefore payable to the homeowners is $53,494.10 of which the builder has already paid $41,700. The balance payable by the builder to the homeowners now is therefore $11,794.10.
7. The parties made submissions in relation to costs of the appeals at the end of the oral hearing. The builder submitted that each party should bear their own costs of the appeals regardless of the outcome. The homeowners submitted that they should obtain a costs order if they were successful and that the parties should bear their own costs if they were not successful. The Appeal Panel is only able to award costs in a matter such as this in accordance with section 60 of the Act on the basis that there exist special circumstances. Those matters to which the Appeal Panel is to have regard in determining whether special circumstances exist are set out in section 60(3) of the Act. It does not appear to the Appeal Panel that any of the matters referred to in that subsection, or any other relevant matter, are applicable to these appeals. In those circumstances, there will be no award of costs in relation to these appeals.
8. The order of the Appeal Panel is therefore in relation to AP 15/65418, in addition to the orders already made and referred to in these reasons: 1. That leave to appeal be granted. 2. That the appeal be dismissed.
9. The order of the Appeal Panel is therefore in relation to AP 15/66881, in addition to the orders already made and referred to in these reasons: 1. That leave to appeal be granted. 2. That the order for payment of $41,700 by NSW Coastal Homes Pty Ltd to AJ Howe and JM Howe be confirmed. 3. That NSW Coastal Homes Pty Ltd pay to AJ Howe and JM Howe the additional sum of $11,794.11 within 28 days of the date of this decision.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 June 2016